AI Structured Summary
Not yet generated for this judgment
Judgment
Mr. Justice V. G. Sabhahit, J.—This appeal is filed by the petitioners in Company Petition No 43 connected with 44 of 2003 being aggrieved by the order dt. 13.03.2009, wherein the learned Company Judge has held that the petitioners are liable to pay stamp duty in respect of immovable property as well as the lease hold right and in view of Article 20(4) of the Schedule to the Karnataka Stamp Act. 1957 (hereinafter called as ''Act'' for brevity) is not squarely attracted and consequently passed the following order: (a) All the Transferee companies are liable to pay the stamp duty in respect of the immovable property as contemplated under Article 20(4) of the Karnataka Stamp Act. In respect of leasehold rights in the immovable property, the stamp duty payable, if any would be as contemplated u/s 19 of the Karnataka Stamp Act.
(b) In so far as the shares, which are cancelled and extinguished, the Transferee Company is exempted from payment, of stamp duty. But however, if the shares are issued or allotted in exchange or otherwise, the company is liable to pay the stamp duty on the amount of consideration paid for such amalgamation.
(c) Ordered accordingly.
The material facts leading up to this appeal with reference to the rank of the parties in Company Petition are as follows: The appellants herein tiled Company Petition Nos.43/2003 c/w 44/2003 seeking sanction for scheme of amalgamation and the same was disposed of by order cit. 18.07.2003. Thereafter, the Transferee Company filed a memo on 14.10.2003 along with the Schedule of Assets of the Transferor Company for the purpose of drawing up decree in Form No. 42 as prescribed under the Companies (Court) Rules, 1959.
1.1 Notice was issued to the inspector General of Registration and Commissioner of Stamps through their counsel i.e. Government Advocate filed a memo before this Court accepting that there is no stamp duty payable with regard to the shares of the Transferor Company being cancelled, since the Transferor Company is a wholly owned subsidiary of the Transferee Company. But however, the Inspector General of Stamps and Registration has stated that there are immovable properties in some of the Transferor Companies and the stamp duty is payable on the market value as per Article 20(4) of the Schedule to the Karnataka Stamp Act. 1957 and the stamp duty payable is at 7% thereof. It was also stated in some of the cases that the buildings are to be valued at Rs. 39,000/- per square and the stamp duty is required to be paid at the rate of 7% on the value so arrived at.
1.2 The common ground urged in all the cases in which the said matter was clubbed with the other Company Petitions, wherein also final order has been passed by this Court by the learned Company Judge and the report of the Inspector General of Registration and Commissioner of Stamps, was submitted, required the petitioners to pay stamp duty as referred to above. Common ground was raised by all the petitioners, including the appellants herein who were petitioners in Company Petition Nos. 43/2003 c/w 44/2003 that amendment to Article 20(4) of the Schedule to the Act was substituted by Act 7/2007 which came into effect from 01.04.2007. Amendment is always perspective and in all these matters the order, sanctioning the scheme of amalgamation was passed prior to amendment of the Act. The proviso to the amended Article 20(4) is to except something out of the enactment or to qualify something enacted therein, but, for the proviso would be within the purview of the enactment. According to them, the proviso is added to an enactment to qualify or create an exception to what, is in the enactment and ordinarily, a proviso is not interpreted as staling a general rule. It was also contended that in terms of the Government, Order dt. 7th January 1966, the State had provided for remission of stamp duty on transfer of property between companies in case transfer takes place between a parent company and a subsidiary company, one of which is the beneficial owner of not less than 90 per cent of the issued share capital of the other. Wherefore, were not liable to pay stamp duty.
1.3 Learned Government Advocate submitted that the petitioners are liable to pay stamp duty as contemplated under Article 20(4) of the Schedule to the Act. Insofar as the transfer of shares is concerned, probably, the petitioners are not liable to pay the stamp duty. But however, insofar as the transfer of immovable property is concerned, they are liable to make good the stamp duty before any decree is drawn up under the Companies (Court) Rules, 1959.
1.4 The learned Company Judge after considering the contention of the learned counsel appearing for the parties and scrutinising the material on record, held that report of the Inspector General of Registration would indicate that in Company Petition No. 43/2003, the immovable property hearing plot. Nos. 42 and 43 of Belogala Industrial Area, situated in Sy. No. 20 of Metagalli village and 69 of Hebbal village, Kasaba Hobli, Mysore Taluk mentioned in Schedule-II of the petition, is transferred in favour of the Transferee Company. In fact, petitioners have also filed valuation report dt. 27.10.2005, which would indicate that pursuant to the Court Order, the property is valued and the name of the owner of the property is M/s. Wood Bore Private Limited Company and the same is transferred in favour of the Transferee Company.
1.5 The learned Company Judge further held that so far as Company Petition No. 43/2003 is concerned, a reading of proviso to Article 20(4) of the schedule to the Act would clearly show that the petitioners are liable to pay 7% of the market value of the immovable property, which was earlier of the ownership of the Transferor Company and later transferred to the Transferee Company, pursuant to the order passed by this Court u/s 394 of the Companies Act the stamp duty is liable to be paid and accordingly, rejected the contention of the petitioners that they are not liable to pay stamp duty, by order dt. 13.03.2009.
Being aggrieved by the said order passed by the learned Company Judge, this appeal is filed under Sec.4 of the Karnataka High Court Act and R/w Articles 20(4) of the Schedule to the Karnataka Stamp Act, 1956 and the order of the learned Single Judge is impugned on the ground that the provisions of Article 20(4) of the Schedule to the Act is prospective and would not be applicable to the present case of the appellants as the order of amalgamation was passed before the Act came into force from 1st April 2007 and order of amalgamation was passed on 13th March 2909. The proviso to Article 20(4) is prospective and cannot be treated as retrospective. The fiscal statute is required to be interpreted in its strict sense and in as much as neither can it be read down or any other interpretation or other than the meaning which comes can be accepted or given, the learned Company Judge has erroneously field that the first proviso is absolutely clear, if immovable property of the Transferor Company is transferred to the Transferee Company, an amount equal to 7% of the market value of the immovable property is liable to be paid. The surmise of the learned Single Judge is inconsistent and self contradictory. The learned Company Judge has erroneously and arbitrarily came to the conclusion that the Companies in Company Petition Nos. 209 of 2003 and 43 of 2003 are liable to pay the stamp duty in respect of the immovable property, contrary to the established principle that the proviso only aides the main charging provision and does not enlarge the scope of the same. Wherefore, the order of the learned Company Judge is liable to be set aside and it may be held that the appellants are not liable to pay any stamp duty as per the valuation made by the Inspector General of Registration and Commissioner of Stamps.
Learned Government Advocate appearing for the respondent submitted that once an order of amalgamation has been passed, the immovable property of the transferor company is transferred to the transferee company and wherefore, tax has to be paid on the valuation of the immovable which is implicitly clear from the provisions of Article 20(4) of the Schedule to the Act and the learned Single Judge has rightly interpreted provisions of the Act and rejected the contention of the appellant that they are not liable to pay tax on the value of the immovable property Wherefore, the appeal is devoid of merit and appeal may be dismissed.
Having regard to the contention of the learned counsel appearing for the parties, the point that arises for determination in this appeal is: Whether the finding of the learned Company Judge, rejecting the contention of the appellants that they are not liable to pay tax on the immovable property transferred under the scheme of amalgamation to the transferee company under proviso to Article 20(4) of the Schedule to the Act, is justified or calls for interference in this appeal?
We answer the above point for determination as follows:
Finding of the learned Company Judge is justified and does not call for interference in this appeal for the following
REASONS
We have given careful consideration to the contention of the learned counsel appearing for the parties and scrutinised the material on record.
The material on record would clearly show that an application had been filed for amalgamation under Sec.394 R/w Sec.391 of Companies Act, 1956 in Company Petition Nos. 43/03 and 44/2003. wherein the subsidiary company is sought to be amalgamated with the parent company. The said petitions were allowed by order dt. 18.07.2003 and the sanction was accorded for amalgamation of the transferor and transferee companies. It was ordered that the transferor company shall stand dissolved without there being a winding up order. The office was directed to draw up a decree in Form No. 42. In the course of the order dt. 18.07.2003, it was observed in para No. 11 of the order that the scheme of amalgamation provides for all the assets and liabilities of the transferor company being vested in the transferee company and the transferee company would be liable to discharge all the liabilities due by the transferor company.
The main objection of the appellants herein for paying stamp duty on the transfer of property as per the order of the Court dt. 18.07.2003, sanctioning the scheme of amalgamation, is that Article 20(4) of the Schedule to the Act has come into effect from 01.04.2007 and the order was passed on 18.07.2003. Wherefore, the said provision would not be applicable. Article 20(4) was brought into effect, including an order of amalgamation of companies, including a subsidiary amalgamating with parent company at the rate prescribed in the schedule. Sec.2(d)(iv) which has been inserted w.e.f. 1.4.1999 includes every order made by the High Court under Sec.394 of the Companies Act, 1956 in respect of amalgamation of companies. 10. The learned Company Judge has held that since the order of amalgamation is only the agreement arrived at between two parties, there is transfer of the property from transferor company to transferee company, the stamp duty is payable and the amended Article to the Schedule cannot be said to be prospective. It is only clarificatory in nature and that even in the above said order passed by this Court, drawn in appropriate Form, which would transfer the immovable property of" the transferor company to transferee company, the Transferee Company is liable to pay tax. It is further held that amendment is by way of substitution and relate back to the date of the Act. Wherefore, negatived the contention of the appellants.
In Hindustan Lever and Another Vs. State of Maharashtra and Another, wherein the provisions of Sec. 2(g)(iv) of the Bombay Stamp Act, 1958 are included, every order made by the High Court under Sec.394 of the Companies Act, 1956, in respect of amalgamation or reconstruction of the companies, was included, the constitutional validity of the same was challenged. In the said case the scheme of amalgamation was approved by the High Court on 3.3.1994. That order was challenged in appeal and Special Leave Petition, without any success. The Hon''ble Supreme Court by reference to definition of ''Conveyance'' under Sec.2(g)(iv) of the Bombay Stamp Act, 1958 which is identical to the provisions of Karnataka Stamp Act held that the constitutional validity of the said section which is contrary to the provisions of Sec.394 R/w Sec. 391 of the Companies Act, wherein the property transferred from transferor to transferee by operation of law, by the order of the Court and would not attract payment of stamp duty. The Hon''ble Supreme Court after analysing the provisions of Sec.394 and 391 and also provisions of definition of ''Conveyance'' and the charging provision under the Schedule which is identical to the provisions of the Karnataka Stamp Act, as in the present case, upheld the constitutional validity of the amended Act by observing as follows in para No. 12 of the Judgement:
Two broad principles underlying a scheme of amalgamation which have been brought out in this judgment are:
that the order passed by the court amalgamating the company is based on a compromise or arrangement arrived at between the parties; and
that the jurisdiction of the Company Court while sanctioning the scheme is supervisory only i.e. to observe that the procedure set out in the Act is met and complied with and that the proposed scheme of compromise or arrangement, is not violative of any provision of law unconscionable or contrary to public: policy. The court is not to exercise the appellate jurisdiction and examine the commercial wisdom of the compromise or arrangement arrived at between the parties. The role of the court is that of an umpire in a game, to see that the teams play their role as per rules and do not overstep the limits. Subject to that how best the game is to be played is left to the players and not to the umpire. Both these principles indicate that, there is no adjudication by the court on the merits as such.
The Hon''ble Supreme Court has further held that the said amendment was by way of abundant caution only by way of clarifying the position as not prospective in nature and observed as follows: "it appears to us that the amendment was made oat of abundant caution and it does not mean that the consent decree was not otherwise covered". It clearly shows that that, the Court was of the opinion that consent decree which purports to convey the title in the property was in an instrument liable for stamp duty at all times and it was only by way of abundant caution that the legislature had included the consent decree in the definition of the word "conveyance".
In view of the above said decision of the Apex Court and the reasoning assigned by the learned Company Judge, which we hold to be justified, we hold that the order passed by the learned Company Judge is justified and does not suffer from any error or illegality as to call for interference in this intra Court, appeal. Accordingly we pass the following: ORDER
Appeal is dismissed with no order as to costs.